More Than Living

What are green mortgages?

Every­one was talk­ing about green mort­gages this time last year. But twelve months on, where can you get one? And what exactly is a green mort­gage anyway? We decided to take a look around.

Home is where the heart is. And, less cosily, it’s where a great chunk of our carbon emis­sions spring from too – around a quarter of the UK’s emis­sions in fact.

So green­ing the nation’s hous­ing stock is of major import­ance in fight­ing cli­mate change. And last year, in his final Budget as chan­cel­lor, Gordon Brown said that he wanted to kick-​​start a new wave of energy-​​efficient homes.

Mr Brown said he had been talk­ing to banks and build­ing soci­et­ies to encour­age a new mort­gage market that would help people make an “imme­di­ate cap­ital invest­ment in energy effi­ciency”. He envis­aged that this would cut energy use and energy bills, ulti­mately paying for itself and increas­ing the sale value of the home.

Cue a lot of talk of ‘green mort­gages’, with lenders big and small jump­ing in to agree that green was the future – and, of course, that they were happy to be a part of it.

Not­ably, Abbey announced that it would be launch­ing a range of green loans, and HBOS (Halifax/​Bank of Scot­land) said it would launch a green mort­gage in 2008. Many ana­lysts agreed that the green mort­gage market was set to move into the mainstream.

That was almost a year ago. So we were won­der­ing: where did all the green mort­gages go?

What’s a green mort­gage anyway?

There are still no rules that say what a ‘green mort­gage’ has to be – when it comes to saving the planet, it’s still up to indi­vidual lenders to decide how they market their products.

How­ever, Mr Brown’s vision of “imme­di­ate cap­ital invest­ment” in energy effi­ciency won’t be hur­ried along by many of those cur­rently on offer.

Most of the ‘green’ deals out there involve carbon off­set­ting, whereby a home’s pre­dicted carbon emis­sions are offset for a while by money inves­ted in carbon-​​positive pro­jects else­where. The­or­et­ic­ally this res­ults in no CO2 emis­sions over­all, and typ­ical off­set­ting schemes rely on plant­ing trees that are inten­ded to ’soak up’ CO2 from the atmosphere.

Lenders that have adop­ted the offset approach include the Hanley Eco­nomic Build­ing Soci­ety, the Teach­ers Build­ing Soci­ety and Gir­affe. Mort­gage broker London and Coun­try (L&C) says that it plants 50 trees for every mort­gage it sells (making “every mort­gage a green mort­gage”), and recently, fin­an­cial broker Eth­ical Investors said that it would offer two years of carbon off­set­ting on the mort­gages it finds for its customers.

Beyond carbon offset

Having paid for the offset, the homeowner isn’t required to do any­thing fur­ther to green the home itself, but not everyone’s happy that these kinds of schemes are green enough. Last year, the Energy Effi­ciency Part­ner­ship for Homes (EEPH) issued a report on green mort­gages, which pro­posed that real green deals should offer some­thing more than an offset.

“Our key mes­sage is that a ‘green mort­gage’ should help cus­tom­ers reduce carbon emis­sions by improv­ing the home that the mort­gage is offered on,” says the partnership’s David Weather­all. “A green mort­gage can’t be just about carbon-​​offset: paying for carbon sav­ings else­where, usu­ally overseas.”

So far, only a hand­ful of lenders go beyond carbon offset. The Co-​​operative Bank, which has long mar­keted its products for their eth­ical dimen­sion, now offers ‘energy-​​efficient advances’ to cus­tom­ers who want to make improve­ments to their home, as does the York­shire Build­ing Soci­ety. The Nor­wich and Peter­bor­ough Build­ing Soci­ety provides cash­back ear­marked for green improvements.

A recent innov­a­tion is Ulster Bank’s solar mort­gage, which offers low interest rates to cus­tom­ers who invest in photo-​​voltaic (PV) micro­gen­er­a­tion for their homes.

Gen­er­ally acknow­ledged to be the green­est of the green is the Eco­logy Build­ing Soci­ety, which lends only on low-​​carbon new builds, green renov­a­tions and res­tor­a­tion pro­jects. Although it is a rel­at­ively small, spe­cial­ist lender, news that the Eco­logy doubled its mort­gage lend­ing last year – des­pite the credit crunch – may stir a few more lenders into step­ping up their green offerings.

A green mort­gage future?

Des­pite wide­spread reports of increased cus­tomer interest in green mort­gages of all kinds, they don’t yet appear to have taken off.

“We offer green mort­gages because we feel it is the right thing to do,” says Alison Rolls, head of com­mu­nic­a­tions at the Nor­wich and Peter­bor­ough Build­ing Soci­ety. “How­ever, the take-​​up is low, which is to be expec­ted as this is still a niche area. The gov­ern­ment needs to do much more to pro­mote energy effi­ciency to homeowners.”

Some ana­lysts sug­gest that the less ser­i­ous pro­viders of green mort­gages have done it more for the good pub­li­city than the real expect­a­tion of any ‘green’ sales.

For most of us, it seems, it still comes down to price – and without tax breaks many green mort­gages (par­tic­u­larly those that go beyond carbon offset) struggle to com­pete with main­stream deals.

“There hasn’t been much of an increase in green mort­gage lend­ing,” says Julia Harris at Money­facts. “Con­sid­er­ing that taking on a mort­gage is one of the largest fin­an­cial decisions we make, paying a lot more for a slightly clearer con­science does not seem to be catch­ing on.”

And what of the green products announced by the big lenders last year?

Well, Abbey launched a ‘green loan’ last Novem­ber, inten­ded to fund a vari­ety of environmentally-​​friendly pur­chases (not neces­sar­ily involving home improve­ment) up to the tune of £25,000. The loan is avail­able at Abbey’s stand­ard rate, and includes the plant­ing of five trees and a free home energy inspec­tion from the Energy Saving Trust.

A spokes­per­son for Hal­i­fax said that the bank is review­ing the market and devel­op­ing its think­ing around green mort­gages with a view to deliv­er­ing “very late this year”.

In the mean­time, homeown­ers who aren’t pre­pared to wait for fin­an­cial ser­vices to turn a deeper shade of green can find out about grants and offers for improv­ing their home via the Energy Saving Trust.

by Charlie
First pub­lished 12.03.08
Updated 25.03.08

Related links:

Abbey

Co-​​operative Bank

Eco­logy Build­ing Society

Energy Effi­ciency Part­ner­ship for Homes

Energy Saving Trust

Eth­ical Investors

Gir­affe

Hanley Eco­nomic Build­ing Society

HBOS

London and Country

Money­facts

Nor­wich and Peter­bor­ough Build­ing Society

Teach­ers Build­ing Society

York­shire Build­ing Society

IMAGES by Flickr users

Fr Antunes, seier+seier+seier and clownfish

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Ori­gin­ally posted 2008-​​03-​​12 15:00:00. Repub­lished by Blog Post Promoter

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